Layaway Is A Scam

539 days ago by
4 comments

With the holiday season quickly approaching many people are trying to figure out what to get their families and how they can afford these gifts.  Some stores, like Kmart have been touting their layaway plans as an affordable way for people to purchase the gifts they want.  So what is layaway?

What Is Layaway

Layaway is a type of agreement that some stores have in which a consumer can reserve an item and make payments towards the item.  The payments are usually made weekly and the store generally charges a fee in order to reserve the item.  If the person fails to pay, the item is returned to the shelves and the customer’s money is returned, except for a restocking fee.

Why Layaway is a scam

Not only do you lose money if you fail to make a payment in the form of a restocking fee, but many stores will charge you to put an item on layaway.  Kmart has offered an 8 week option in which there is a $5 service fee for layaway, a $10 cancellation fee, a $15 or 10% (whichever is greater) down payment and payments every 2 weeks. So let’s say you want to put $250 worth of items on layaway for Christmas (a small tv, jewelry, etc).  You would have to pay $5, plus a $25 down payment.  The main issue here is the $5 service fee. 

The service fee is a fee charged for holding your items on layaway.  Why should you pay a store money to hold an item for you?  The only reason that I can see to pay the store a fair amount of money, is that the item will quickly go out of stock.  Here, that $5 is 2% of the total amount of the product.  So not only does the store make money off you paying every 2 weeks without even giving you a product, but it makes an extra 2% just by allowing you to make payments.  Compare this option with putting money into a bank account over the 8 weeks.  Right now, the interest rates paid are fairly low, generally 1% would be a decent return.  But, you would save roughly 3% in total by just saving the money on your own. 

Why Do Companies Do Layaway?

There is one main reason a company will offer layaway; to make more money.  Not only do they keep the product during the entire time you are making payments, if you miss a payment, not only do they still have the product in perfect condition, but they are able to charge you a cancellation or restocking fee and then return the rest of the money you have paid.  Notice that the down payment is the exact amount of the cancellation fee (if not more) for Kmart, this isn’t a coincidence, it is done to make sure that if someone misses a payment, Kmart is able to still make money.  

What Can You Do?

You should carefully look over any type of contract you sign.  If you’re a small business and thinking of offering layaway, have an attorney check over your sample contract.

  • MLS

    My spouse and I couldn’t find the right quantity of a toy item while shopping in our local Kmart Store during the Pre-Thanksgiving (Early Black Friday Sale) and check for the toy at Kmart online. The same Sale was offered online. We found the game item, it was on sale online and in the store at the same price and we were able to obtain the quantity we needed online. LayAway was an option that we decided to do this year. We didn’t mind the small Service Charge or (Holding Fee). We understood what it was for and had planned to pay off our LayAway sooner than eight weeks. The online Kmart LayAway transaction was easy to complete. A Purchase Receipt LayAway Contract was received by email that we printed out and saved. A problem, or error was found the day I went online to make the first layaway installment payment. The LayAway Account balance and price of the toy item had increased since the day I purchased it on sale two weeks prior. Alarmed and concerned, I contacted the Kmart LayAway. The LayAway clerk didn’t understand what had happened. Later he told me that the items listed on the E-Commerce Internet Store are not always on sale in the store too. However, on the day my spouse and I checked and purchased, it was. Nevertheless, I had a Receipt of Purchase and LayAway Contract Agreement at a lower price. The Kmart Clerk said he needed to talk to someone in the office and get back to me. In the meantime, I contacted the Customer Service via the telephone number listed on my email Kmart Receipt. Customer Service patched me through to the Online Solution Department where I was informed that “No, one can change or modify a LayAway Contract Agreement” after it has been established, accepted and terms agreed upon.
    Well, the LayAway clerk called during the time I was talking to Online Solution’s and left a messge.
    “They head office wanted my LayAway Contract Cancelled and create a New LayAway Contract at the Regular Store Price. The Internet, ToyBook and Sales ended 11/29/2010. My Purchase and LayAway was made online on 11/19/2010. Well, this guy said he didn’t like what had happened and he fixed and lower my LayAway Account Balance.
    The Online Solution achieved connection into my LayAway Account and saw the changes that had happened and the amounts were not the same what they had emailed me on 11/19/2010 and told me to print out a copy of everything and go to the Kmart Store and talk to the Manager. So, my spouse and I did just that. We took our items off LayAway and paid our balance.

    Can a Kmart store “change” and “modify” a purchase LayAway Contract that was “already agreed, accepted upon?

    For now, my spouse and I won’t be placing items on LayAway.

  • Jeffrey Aguilera

    Your math is pretty bad. The 2% fee charged for the layaway is incurred over two months, but the 1% interest paid by banks is over an entire year. At best, the banks will pay about 0.15% over the two month span, not 1% as you claim.

    Layaway is still a scam: You’re paying a fee for the right to make payments on a product in advance of receiving it.

  • BabyStrangeLoop

    The monkey puts its paw in the box to get the coconut. The monkey can’t fit the coconut back through the hole in the box and is too greedy to let go of the coconut so it is caught in a trap.

    Consumers purchase on layaway for similar reasons.

  • Ashley

    After placing a large 12 week layaway at sears, the store abruptly cancelled my agreement. No explanation given. Payments were made according to terms of the agreement. At the time of cancellation employee checked computer and informed me they “still had items in stock”. Agreement clearly states that, “layaways which are delinquent by more then 14 days may be cancelled by sears”. I went into store immediately after due date to make payment which was due on January 20th and was informed that day a check had supposedly been mailed on the 22nd.WHERE IS MY MONEY! I have yet to receive a check 2+ weeks later. All they can say is “it was mailed”. THEY REFUSE TO PLACE A STOP PAYMENT! THEY REFUSE TO ISSUE ANOTHER CHECK TO CORRECT ADDRESS! THEY REFUSE TO REFUND FEES FOR SETUP AND THEIR ERRONEOUS CANCELLATION! THEY REFUSE TO REINSTATE MY LAYAWAY! Here’s what they will do. Assign a case manager, then days later inform you, “he will be out of the office for an extended period of time”. Then, assign a replacement case manager who won’t ISSUE A STOP PAYMENT, WON’T ISSUE ANOTHER CHECK, WON”T REFUND FEES, WON”T REINSTATE LAYAWAY. But he will inform you that he also “will be out of the office for an extended period of time”. All calls to corporate are abruptly ignored once they see your account has a case manager. Now I check online sears and of course items I already paid 800+ dollars on are showing out of stock as listed “unavailable”. Of course they won’t reinstate my layaway! Why would they want to honor the Black Friday prices, I had supposedly locked in with this layaway? They can see this supposed check hasn’t been cashed. I told them they have the wrong address. They won’t even ask for the correct address. WHAT A JOKE! DON”T USE SEARS LAYAWAY, DON”T LET THEM STEAL FROM YOU TOO! PLEASSSE avoid them next Black Friday and don’t fall for their Layaway Scam!

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